[WSJ]
Yields on Puerto Rico Debt Hit High - (online.wsj.com) Puerto
Rico is struggling to convince investors and credit-rating firms that it is on
the path to financial health amid rising borrowing costs and fears over a
potential downgrade of its debt. Yields on Puerto Rico's $70 billion worth of
debt, which is held by many small investors through mutual funds, ended 2013 at
record highs, raising questions over the commonwealth's ability to tap credit
markets to bolster its finances. The average yield on Puerto Rico's 10-year
bonds hit 9.87% on Friday and hovered there through Tuesday, the last trading
day of 2013. That was the highest ever in Thomson Reuters Municipal Market Data
records going back to 1997. Yields, which move in the opposite direction of
prices, more than doubled in 2013. The coming months are shaping up to be a
test for Puerto Rico. The island's beleaguered economy makes it more difficult
for Puerto Rico to juggle its budget deficit as well as its debt load, which
weighs in at nearly 70% of GDP according to the Center for Economic and Policy
Research. Moody's Investors Service and Fitch Ratings have warned of potential
downgrades of Puerto Rico debt to "junk" status, citing the
borrower's growing challenge in tapping debt markets.
Retired
state workers sue over Illinois pension changes - (www.chicagotribune.com) A
group representing retired state workers on Thursday filed the second lawsuit
challenging sweeping changes to the state’s public employee pension system,
arguing the measure violates a clause in the Illinois Constitution intended to
protect retirement benefits by “gutting” annual cost-of-living increases. The
Retired State Employees Association of Illinois wants a Sangamon County judge
to throw out the pension law and set up an escrow fund to deposit the
difference in benefits while the matter is sorted out in court. The lawsuit is
one of several expected to be filed against the pension law in the coming
weeks, including promised challenges from the state’s major employee unions.
Last week, the Illinois Retired Teachers Association sued in Cook County court.
A spokeswoman for Democratic Gov. Pat Quinn, who signed the pension bill into
law a month ago, maintained the retirement system overhaul will be upheld as
constitutional.
Brazil
Posts Worst Trade Balance Since 2000 as Imports Surge - (www.bloomberg.com) Brazil last year posted the worst trade
balance since
2000 as consumer demand boosted imports and slower global growth crimped sales
abroad. Latin America’s biggest economy had a trade surplus of $2.56 billion,
the Trade Ministry said in a report posted on its website today. Imports in
2013 rose 6.5 percent on a daily average, totaling $240 billion for the year,
and exports dropped 1 percent to $242 billion. That’s the worst performance
since Brazil had a trade deficit in 2000. Brazil reported a trade surplus of
$2.65 billion in the last month of the year, exceeding forecasts for a $1.5
billion surplus made by economists surveyed by Bloomberg. The economy grew 2.3 percent last year, more
than double the pace of 2012 while still trailing the Latin American average of
2.37 percent, according to analysts polled by Bloomberg. Retail sales have
outpaced gains in gross domestic product, expanding an average 4 percent in the
first 10 months of 2013 as the jobless rate dropped. The trade balance will
improve this year on increased production of oil and grain and a more
“beneficial” exchange
rate,
Foreign Trade Secretary Daniel Godinho told reporters in Brasilia. Risks
include slower growth in developed nations and China, he said.
Beanie
Baby Billionaire Seeks to Avoid Jail for Tax Crime - (www.bloomberg.com) H.
Ty Warner, the billionaire creator of Beanie Baby plush toys, asked a judge to
give him probation, not prison, for evading taxes on secret Swiss accounts that
held as much as $107 million. Warner, 69, faces 46 months to 57 months in
prison under nonbinding guidelines when he’s sentenced Jan. 14 in Chicago. The maker of plush toys and hotel operator
asked U.S. District Judge Charles Kocoras to impose a term of probation with
community service, according to a Dec. 31 court filing. Warner is among more
than 100 people prosecuted in the past five years during a U.S. crackdown on
offshore tax evasion. His lawyers argued that “dozens of individuals who
engaged in the exact same conduct with respect to undisclosed overseas
accounts” got probation. “This case concerns an isolated event in Ty’s
otherwise law-abiding life, during which he has paid approximately $1 billion
in taxes,” according to the filing. “There is no reason to believe prison time
is necessary to prevent him from engaging in tax evasion again.”
1.3
Million People Just Lost Jobless Benefits. It Could Get Ugly - (www.businessweek.com) When
Congress reconvenes on Jan. 6, one of the first issues it will take up is
whether to renew an emergency federal unemployment program that expired on Dec.
28, cutting off 1.3 million jobless workers. Enacted in 2008 at the start of
the recession, it provided up to 47 weeks of benefits for those still
looking for work when their state unemployment benefits ran out. Senate
Majority Leader Harry Reid says he’ll try to pass a temporary extension, but
most Republicans have balked at the $25 billion-a-year cost. If the program
isn’t revived, the impact could be significant—not just for the
1.3 million people losing a vital lifeline but on the broader economy. How
will these workers fare? One place to look for answers is North Carolina. Last
February, at the behest of the business community, Republican Governor Pat
McCrory signed a bill cutting the amount and duration of state jobless
benefits, even though North Carolina’s unemployment rate ranked among the
highest in the country. The state had exhausted its unemployment trust fund,
paid for by business taxes, and had borrowed $2.5 billion from the federal
government to pay jobless claims. “We’re going to pay down that debt, make the
system solvent, and provide an economic climate that allows businesses, large
and small, to put people back to work,” McCrory said at the time. When the new
law took effect on July 1, the maximum weekly benefit fell from $535 to $350
and its duration fell to between 12 and 20 weeks (depending on the state’s
unemployment rate) from 26 weeks—the standard in most other states.
Euro
zone factories end 2013 on a high, but France a worry: PMIs - (www.reuters.com)
U.K. Manufacturing Unexpectedly Cools as Export Demand Weakens - (www.bloomberg.com)
U.K. Manufacturing Unexpectedly Cools as Export Demand Weakens - (www.bloomberg.com)
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